Social Media Influencers: Legal Considerations for Brands

By: Andrew Peken

Brands have increasingly turned to social media influencers – individuals with thousands or even millions of loyal and engaged followers – as a more direct and tailored way to target and engage consumers online. It is estimated that social network users will spend a daily average of 1 hour, 22 minutes on social media in 2020, an annual increase of 8.8%.[1] In 2019, companies spent an estimated $5.2 billion on influencer marketing on Instagram, an annual increase of 22%, and experts estimate the Instagram influencer market to be from $5 billion to $6.5 billion in 2020, despite the impact of COVID-19.[2]So, what do brands need to be aware of when considering entering into an agreement with a social media influencer?Know Your InfluencerBrands should be careful to select the right social media influencer. In addition to ensuring the person and his/her follower base is the right “fit” for the products to be promoted, brands should undertake appropriate diligence into past social media posts and other public statements made by the influencer. Racist, sexist, derogatory, profane and other inappropriate or offensive posts coming to light reflect poorly on the influencer, but are also likely to embarrass the brand and tarnish its reputation and business.Similarly, as the brand is relying on the influencer’s ability to reach an engaged captive target audience, the brand should ensure the influencer’s follower base is genuine and has grown organically. If the influencer has spikes and dips in the growth chart of followers over time, this may be a sign of the influencer having purchased followers. Ideally, the influencer should represent that he/she has not paid for followers or likes. Also, while some fake or bot followers might be expected with any influencer, brands should be wary of influencers with an unusually high percentage of such followers.Last, consider the influencer’s track record with other brands and previous promotions. Brands should ask for information regarding level of social media engagement and proof of past successes for other brands.Deliverables and ServicesThe parties should have clear agreement on the deliverables and services the influencer is expected to provide. The parties should discuss and agree which products will be promoted, how many posts, frequency and timing of posts, length and format of content (e.g., text and photos only, or will video content also be included), and which social media platforms.Ideally, the brand and influencer will coordinate on the specific dates and times of posts. If there are any important dates for sponsored posts – a product launch or fashion week, for example – be sure to specifically list these. Also consider requiring a “no post window” before and after a sponsored post so the brand’s post is not lost in a flurry of other posts. The brand should also be permitted to repost and promote influencer posts. Last, except as may be required for legal reasons, the influencer should not delete or alter an approved post during the term of the partnership without brand’s consent.Posts should be in the influencer’s “own voice” to sound authentic. Typically, posts will be composed by the influencer and subject to brand review and approval (including review and approval of any images and video) before posting. All content should be original, and the influencer should indemnify the brand against any claims of intellectual property infringement (including copyright, publicity rights and trademarks).Any additional services should also be clearly specified. Will the influencer be required to attend photo or video shoots? Is the influencer collaborating on products and required to attend meeting and review and approve samples and final products? Will the influencer be required to attend a product launch or other events and speak to the media?ExclusivityBrands should ensure that the influencer is not simultaneously promoting similar products for the brand’s competitors, which is likely to dilute the influencer’s endorsement of the brand. The scope and duration of any exclusivity restrictions should be clearly delineated. At a minimum, the influencer should agree to exclusivity within an agreed territory with respect to the product category or categories the influencer is promoting for the brand. This restriction could also include, if appropriate, not wearing products of competing brands.Intellectual Property IssuesThe agreement should clearly indicate who owns the content created, and how it can be used. Typically, content created for posts is owned by the influencer, and the use of this content, and the influencer’s image, name, voice, likeness, signature, voice, quotes, biography, photographs and video, etc. will be licensed to the brand. If these licensed rights are to be used in the brand’s marketing campaigns, this should be expressly noted in the agreement. If the influencer will be collaborating in the design of products or marketing materials, the agreement should contain customary “work for hire” language assigning to the brand all the influencer’s rights in these products and materials.Legal ComplianceThe agreement with the influencer should require that the influencer complies with all applicable laws and rules, including the Federal Trade Commission Endorsement Guides and social media platform rules and policies.As note by my partner, Adam Michaels (https://hballp.com/the-coming-ftc-crackdown-on-misleading-influencer-marketing/), in February 2020, the FTC signaled it will be more vigilant in regulating influencer marketing, proclaiming that “bold steps” are needed “to safeguard our digital economy from lies, distortions, and disinformation.” FTC Commissioner Rohit Chopra Commissioner Chopra stated that “[w]hen companies launder advertising by paying an influencer to pretend that their endorsement or review is untainted by a financial relationship, this is illegal payola.” Both influencers and brands may be subject to civil penalties and damages, as well as private lawsuits under consumer protection laws.Brands should have clear rules for their paid influencer partners to ensure compliance with the FTC Endorsement Guides and other laws. In particular, influencers should ensure that sponsored posts are clearly and conspicuously marked “#ad,” “#sponsored,” or “#paid partnership” above the “more” button (since many consumers may only read the first few lines of a longer post, and not click to read “below the fold”). Brands should make clear that violation of these rules may result in the termination of the partnership.Morals ClauseIn addition to customary termination rights for breach of the agreement (including failure to comply with laws, FTC guidelines and social media policies), the brand will want to include a so-called “morals clause” granting the brand the right to terminate for bad acts of the influencer that might inflict reputational damage on the brand.ConclusionThe use of social media influencers is a relatively new, and fast growing, segment of the advertising medium. Brands wishing to use influencers need to be aware of the specific legal considerations that arise out of these relationships. A tailored and comprehensive agreement between the parties is key to define the parties’ rights and obligations, and protect the brand’s interests.Andrew Peken is a partner at HBA whose practice includes corporate and transactional matters, including mergers and acquisitions, joint ventures, venture capital and private equity, structured finance, outside general counsel and corporate advisory services.[1] https://www.emarketer.com/content/us-adults-are-spending-more-time-on-social-media-during-the-pandemic[2] https://hypeauditor.com/blog/the-instagram-influencer-market-reached-5-24-billion-in-2019-and-despite-covid-19-it-will-not-fall-below-5b-in-2020-chart/